Leeds United buyer Gulf Finance House shrugs off £800m cash loss
Telegraph 10/10/12
The Middle East investment-banking group poised to take over Leeds United held less than £4million in cash in June this year, £800million less than at the end of 2008, Daily Telegraph analysis can reveal.
By Matt Scott
Bahrain-based Gulf Finance House is the parent company of GFH Capital, which has been in talks with Ken Bates over a buy-out since early summer. According to the stockmarket-listed accounts of the parent company, at the end of June this year the former held only £3.64million in cash, down from £804million at the 2008 year-end. “The financials are the parent company’s not ours,” GFH Capital’s chief executive, David Haigh – who is expected to take up a role – told The Daily Telegraph. “All I can say is the money is available but I can’t give you any more detail because we are a listed entity.”
Haigh added that GFH have long-term investments in the Middle East. “We were set up by the Islamic Development Bank. It’s not just about making money but long-term investments. The original business plan was mega real-estate investments in the Middle East and Dubai,” he said.
“The Bahrain Financial Harbour [a flagship GFH development] is like taking Canary Wharf into Bahrain. It’s something we conceptualised, built and developed.
“We’ve done something similar in Tunisia for a while but the Arab spring put it on hold. We have done similar things in Qatar and India but because of the changes in the [financial] world in 2008 there have been valuation issues.”
Those valuation issues have taken their toll on the value to investors in GFH, and particularly on its capital buffers. The bank’s asset and cash holdings have fallen from £2.17billion at the end of 2008 to £511.3million in June this year.
“The property market has slumped and that affects valuations,” Haigh said. “It looks a lot to you but to us, without wishing to sound arrogant, it’s peanuts. Every other bank in the world has had the same things. Since [2008] the business has realigned itself and Tunisia and Bahrain are doing well again. The cash position is improving. We have the money to do this [Leeds deal].”
Since the end of 2008, investors have injected £228million cash in new equity. GFH bank’s executive chairman, Esam Yousif Janahi, a Bahraini national, holds the largest share with an 11.26 per cent stake.
Haigh describes the other main shareholders as “large Islamic financial institutions and sovereign-wealth funds”. According to its regulatory filings, the only other shareholder with more than five per cent of GFH bank is Kuwait’s Muthanna Investment Company, which describes itself as being involved in a number of financial services.
Since the collapse of Lehman Brothers in 2008, which precipitated the global financial crisis, other giants of the investment banking industry such as Bear Stearns and JP Morgan Chase have suffered their own challenges, at a massive cost to investors.
“Ours is very conservative, ethical banking,” said Haigh. “If you look at the Middle East it is sovereign wealth and government-backed. It has been affected but it’s not as bad as elsewhere.”
According to Deloitte, in the 2010/11 season, 14 of the 24 Championship clubs lost £5million or more, £4 was spent for every £3 generated and the wages-to-turnover ratio was 88 per cent.
“We believe Leeds is in a fantastically unique position for all sorts of factors,” Haigh said. “We think Leeds has a fantastic existing management and administration on and off the pitch and that, with the right investment, we can build a sustainable future in that.
“It is about getting the focus back on the football and ensuring Premier League promotion with engaged, happy fans. We are long-term investors: there is no two- or three-year exit plan.”
Seventh-placed Leeds have not released details of their cash flows or balances but declared a pre-tax profit after player trading of £859,000 in 2010/11 on revenues of £32.7million. The decision last year to sell the season-ticket income for this campaign and next – for £5million – could, however, put pressure on future profits. There will also be a need for significant capital expenditure if Haigh realises his plan to repurchase Elland Road. Yorkshire Consortium, the club’s former owner, sold the ground to the property developer Jacob Adler in a sale-and-leaseback agreement. He sold it to an offshore trust. “But Ken [Bates, the club’s chairman-owner, who is conducting the sale] and Leeds have said we’ve allocated sufficient capital to do it,” Haigh said. “There is a clear business plan: to get back into the Premier League and stay there.”
The Middle East investment-banking group poised to take over Leeds United held less than £4million in cash in June this year, £800million less than at the end of 2008, Daily Telegraph analysis can reveal.
By Matt Scott
Bahrain-based Gulf Finance House is the parent company of GFH Capital, which has been in talks with Ken Bates over a buy-out since early summer. According to the stockmarket-listed accounts of the parent company, at the end of June this year the former held only £3.64million in cash, down from £804million at the 2008 year-end. “The financials are the parent company’s not ours,” GFH Capital’s chief executive, David Haigh – who is expected to take up a role – told The Daily Telegraph. “All I can say is the money is available but I can’t give you any more detail because we are a listed entity.”
Haigh added that GFH have long-term investments in the Middle East. “We were set up by the Islamic Development Bank. It’s not just about making money but long-term investments. The original business plan was mega real-estate investments in the Middle East and Dubai,” he said.
“The Bahrain Financial Harbour [a flagship GFH development] is like taking Canary Wharf into Bahrain. It’s something we conceptualised, built and developed.
“We’ve done something similar in Tunisia for a while but the Arab spring put it on hold. We have done similar things in Qatar and India but because of the changes in the [financial] world in 2008 there have been valuation issues.”
Those valuation issues have taken their toll on the value to investors in GFH, and particularly on its capital buffers. The bank’s asset and cash holdings have fallen from £2.17billion at the end of 2008 to £511.3million in June this year.
“The property market has slumped and that affects valuations,” Haigh said. “It looks a lot to you but to us, without wishing to sound arrogant, it’s peanuts. Every other bank in the world has had the same things. Since [2008] the business has realigned itself and Tunisia and Bahrain are doing well again. The cash position is improving. We have the money to do this [Leeds deal].”
Since the end of 2008, investors have injected £228million cash in new equity. GFH bank’s executive chairman, Esam Yousif Janahi, a Bahraini national, holds the largest share with an 11.26 per cent stake.
Haigh describes the other main shareholders as “large Islamic financial institutions and sovereign-wealth funds”. According to its regulatory filings, the only other shareholder with more than five per cent of GFH bank is Kuwait’s Muthanna Investment Company, which describes itself as being involved in a number of financial services.
Since the collapse of Lehman Brothers in 2008, which precipitated the global financial crisis, other giants of the investment banking industry such as Bear Stearns and JP Morgan Chase have suffered their own challenges, at a massive cost to investors.
“Ours is very conservative, ethical banking,” said Haigh. “If you look at the Middle East it is sovereign wealth and government-backed. It has been affected but it’s not as bad as elsewhere.”
According to Deloitte, in the 2010/11 season, 14 of the 24 Championship clubs lost £5million or more, £4 was spent for every £3 generated and the wages-to-turnover ratio was 88 per cent.
“We believe Leeds is in a fantastically unique position for all sorts of factors,” Haigh said. “We think Leeds has a fantastic existing management and administration on and off the pitch and that, with the right investment, we can build a sustainable future in that.
“It is about getting the focus back on the football and ensuring Premier League promotion with engaged, happy fans. We are long-term investors: there is no two- or three-year exit plan.”
Seventh-placed Leeds have not released details of their cash flows or balances but declared a pre-tax profit after player trading of £859,000 in 2010/11 on revenues of £32.7million. The decision last year to sell the season-ticket income for this campaign and next – for £5million – could, however, put pressure on future profits. There will also be a need for significant capital expenditure if Haigh realises his plan to repurchase Elland Road. Yorkshire Consortium, the club’s former owner, sold the ground to the property developer Jacob Adler in a sale-and-leaseback agreement. He sold it to an offshore trust. “But Ken [Bates, the club’s chairman-owner, who is conducting the sale] and Leeds have said we’ve allocated sufficient capital to do it,” Haigh said. “There is a clear business plan: to get back into the Premier League and stay there.”